Rumors Swirl Around Microsoft's Ad Business

All Things D is reporting that Facebook (FB) is interested in buying Microsoft's (MSFT) Atlas ad platform. Sources say Facebook is looking to launch its own version of Google's (GOOG) DoubleClick as a third-party ad network.

Atlas came to Microsoft through the 2007 aQuantive purchase. It would require a lot of work to get it up to the standard Facebook wants but, according to the story's sources, it would be easier for Facebook than starting from nothing and trying to build one itself.

I am wondering if this news signals a new openness on the part of Microsoft and CEO Steve Ballmer to sell other parts of its Online Services Division (OSD). Several months ago, Nomura analyst Rick Sherlund suggested that Microsoft should sell its Bing search engine to Facebook.

According to Barron's, Sherlund said Microsoft is losing $2.5 billion a year with Bing, a huge 7-percentage-point hit to operating margin, and investors have not been enthusiastic about the business and don't see the rewards. Sherlund also questioned why Microsoft even needs to be in search when touch-screen technologies and tablet operating systems are more integral to its strengths and goals.

I would go further and say that Microsoft investors would like to see all of OSD jettisoned. It has been an albatross hanging around the neck of the stock for some time. For years, Microsoft has been pouring money into the division with no sign of a payback.

Beyond the ad tech and Bing, Microsoft also has some online Web properties but they're pretty much only on PCs. They have no mobile traffic.

What's the payoff to Microsoft investors for keeping these assets? If Ballmer were to offload OSD, and still share in the upside of Facebook growth managing the business, Microsoft's stock would rally strongly.

Of course, for this to happen, Yahoo! (YHOO) would have to be involved, as it is Bing's primary search partner. I'm sure there's a way everyone could benefit with a reshuffling of the assets.